Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

Support this site! Clicking the links (below) takes you to
Amazon.com. If you buy ANYTHING, they pay for the referral.

Archives

Wednesday 12/31/14. Chart Pattern Indicator: Bad News Coming

This is a picture of the chart pattern indicator on the daily scale. The indicator is the line chart below a chart of the S&P 500 composite.

I swapped targets for the indices over the next two weeks. I have a feeling that they will retrace their gains since we bottomed in mid December.

The indicator isn't there yet. It shows we are still bullish but curving down. The market was weak today and that's why the indicator dipped.

This is another view of the CPI only it shows signal changes.

The chart doesn't show the weakness yet. It's still green, but if we get a strong decline, it'll flip to bearish. I don't expect that to happen. Rather, I think the index will ease lower in the coming
two weeks, taking the CPI into neutral then bearish territory.

However, I leave open the possibility that the new year will bring prosperity and the index will soar. I don't really believe that, but it's still possible.

Yes, Noam, I'll do the year ahead look tomorrow.

-- Thomas Bulkowski

Tuesday 12/30/14. Rectangle in the Dow

The index dropped by -0.1% or -15.48 points. Since 10/01/1928 the index made 1246 similar moves on a percentage basis. After those moves, the next day's...

Average gain was 0.7% on 649 occasions.

Average loss was -0.8% on 597 occasions.

Expect the index to close higher 52.1% of the time.

Weekly, since inception on 6/14/2011:

The prediction of the index closing higher has been right 87/138 or 63.0% of the time.

The prediction of the index closing lower has been right 22/41 or 53.7% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

$ $ $

I show a picture of the Dow industrials on the 5-minute scale.

Today (Monday) was a calm day as the chart shows. Trading was flat almost throughout the session. But look at the gentle upward curve over the last 10 days. Does this suggest a retrace is coming?

If so, I marked the three Fibonacci retrace values: 38% (top blue line), 50%, and 62% (bottom blue line). Those lines are approximate based on a low of about 17,100 and a top 1,000 points higher.

Marked in red is a rectangle top. A rectangle forms when the security is locked in a trading range. The length of the rectangle can last for hours on the intraday charts or for weeks
to months on the daily charts.

Breakouts from rectangle tops are upward 69% of the time. It is possible that the index will resume its move upward in this holiday shortened week.

$ $ $

Thanks to all of you that brightened my Christmas by clicking on the plus one feature ==>

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Dow industrials, sorted by value. When several are near each other (small differences),
the area might act as support or resistance.

Wednesday 12/24/14. Chart Pattern Indicator: What's It Say?

This is a picture of the chart pattern indicator on the daily scale. The indicator is the line chart below a chart of the S&P 500 composite.

The chart shows nothing exciting, really. The indicator has impaled itself against the ceiling, 100. I'm scratching my head on this since my portfolio said the Dow's 154 point move 0n 12/22 seemed narrow to me (meaning
I didn't make as much as I should have). Maybe it's the shortened holiday week that is throwing off my game.

This is another view of the CPI only it shows signal changes.

This chart shows green bars for bullish signals, white for neutral, and red for bearish. Recently, the green bars have taken over.

My worry is not about these two charts. They are bullish. Rather, it's about a possible 2B patterns. That's when a security such as the Dow rises to near or at the level of a prior peak and stops.
It can rise slightly above it, as in this case, or remain slightly below it. Then you see a reversal. The reversal is often short but you never know.

$ $ $

I'm going to pretend I'm a submarine going under the ice until the close of Monday's trading. I'll be quiet until then. I'll be here, but just taking a break from my commentary duties.

If you like this site or this blog then please click the Google plus 1 (g+1) thingy immediately below. I'm supposed to have over 2,000 unique daily visitors but only 23 of you like this page. That doesn't sound right.

Have a happy and safe holiday, too.

-- Thomas Bulkowski

Tuesday 12/23/14. Intraday Market Direction: Dow

The index climbed by 0.9% or 154.64 points. Since 10/01/1928 the index made 484 similar moves on a percentage basis. After those moves, the next day's...

Average gain was 0.6% on 286 occasions.

Average loss was -0.7% on 198 occasions.

Expect the index to close higher 59.1% of the time.

Weekly, since inception on 6/14/2011:

The prediction of the index closing higher has been right 86/137 or 62.8% of the time.

The prediction of the index closing lower has been right 22/41 or 53.7% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

$ $ $

I show a picture of the Dow industrials on the 5-minute scale.

A double bottom appears at AB. This confirmed as a valid pattern when the index closed above the peak between the two bottoms.

More recently, a rising wedge appears at C. A rising wedge breaks out downward 69% of the time (in stocks). That suggests a lower close on Tuesday. If that happens,
it will be at odds with the above probabilities which are looking for a higher close.

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Dow industrials, sorted by value. When several are near each other (small differences),
the area might act as support or resistance.

My Prediction

The index sports a diamond top, outlined here in red. At A, the index has pulled back to the price of the breakout, just as well-behaved pullbacks should.

The question now is what happens next?

With diamond tops, the fear is that the quick rise from the low at B to the diamond will reverse. That means a decline all the way back down to not B, but just above B. (It's rare that you get a full retrace.)

Alternatively, the pullback will continue and move to higher ground. That is what you are seeing in the other indices, the Dow utilities, for example. And that is what I expect to happen in the coming week or two.
This week, since it's holiday shortened, can be volatile. See my holiday article to find out what happens the day before and after the Christmas holiday, as well as other holidays.

A Brief Look Back

The following is a brief review of how the markets performed over time. The numbers refer to the close-to-close move in the Dow industrials.

Monday:Down 99.99 points.

Tuesday:Down 111.97 points.

Wednesday:Up 288 points.

Thursday:Up 421.28 points.

Friday:Up 26.65 points.

For the Week...

The Dow industrials were up 523.97 points or 3.0%.

The Nasdaq composite was up 111.78 points or 2.4%.

The S&P 500 index was up 68.32 points or 3.4%.

Year to Date...

Dow Industrials

1.0% down from the high of 17,991.19 on 12/05/2014.

16.1% up from the low of 15,340.69 on 02/05/2014.

Nasdaq

0.9% down from the high of 4,810.86 on 11/28/2014.

20.8% up from the low of 3,946.03 on 04/15/2014.

S&P 500

0.4% down from the high of 2,079.47 on 12/05/2014.

19.1% up from the low of 1,737.92 on 02/05/2014.

Economic Reports

The following information is derived from yahoo!finance and sometimes Bloomberg.com with times local to the east coast.

Report

Time

A-FRating

Description

Existing home sales

10:00 M

C

Counts sales of used homes.

Durable goods orders

8:30 T

B

Measures orders, shipments of goods with lifespans >3 years.

Gross domestic product

8:30 T

B

Measures economic activity; GDP deflator measures inflation.

Michigan sentiment

9:55 T

B-

Consumer sentiment: Measures strength of consumer spending.

Personal income & consumption

8:30 or 10:00? T

C+

Measures sources of income to predict future demand.

Personal consumption expenditures

8:30 or 10:00? T

C+

Covers durables, non-durables, and services.

New home sales

10:00 T

C+

Shows sales of single-family homes.

Initial jobless claims

8:30 W

C+

Counts people filing for state unemployment benefits.

Crude inventories

10:30 W

?

My guess: Measures oil inventory.

Options Expiration

No options expire this week.

Swing and Position Traders: Chart Pattern Indicator

As of 12/19/2014, the CPI had:

2 bearish patterns,

24 bullish patterns,

293 patterns waiting for breakout.

The CPI signal is 92.3%, which is
bullish (>= 65%).

The chart pattern indicator is bullish
with 1 of 3 half triangles showing (). Additional triangles are a measure
of strength with solid triangles meaning a more reliable signal than half triangles.

Swing Traders: Pivot Points

The following is based on an SFO article in December 2004 by John Seekinger, titled, "Take a
two-dimensional approach." He offers these tips.

Index

S2

S1

Pivot

R1

R2

Dow Industrials (^DJI): Daily

17,681

17,743

17,808

17,870

17,936

Weekly

16,776

17,290

17,582

18,097

18,389

Monthly

16,698

17,251

17,621

18,175

18,545

S&P500 (^GSPC): Daily

2,053

2,062

2,070

2,079

2,087

Weekly

1,935

2,003

2,040

2,108

2,146

Monthly

1,934

2,002

2,041

2,109

2,148

Nasdaq (^IXIC): Daily

4,718

4,742

4,762

4,786

4,806

Weekly

4,463

4,614

4,698

4,849

4,933

Monthly

4,444

4,605

4,708

4,868

4,971

Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.

S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.

If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.

In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.

A move outside of daily R1 or S1 usually does not mean a breakout.

The odds suggest that the entire week's price action will remain between weekly R2 and S2.

Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.

Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

Pivot point: P = (H + L + C)/3

First resistance level: R1 = (2 * P) - L

First support level: S1 = (2 * P) - H)

Second resistance level: R2 = P + (R1 - S1)

Second support level: S2 = P - (R1 - S1)

H = high price , L=low price, C=closing price

Consecutive Price Trends

Index

ConsecutiveCloses So Far

%

Comments

Dow industrials (^DJI)

1 week up

43.8%

Expect a random direction.

1 month down

19.2%

Expect a reversal soon.

S & P 500 (^GSPC)

1 week up

43.1%

Expect a random direction.

3 months up

36.2%

The trend may continue.

Nasdaq composite (^IXIC)

1 week up

44.2%

Expect a random direction.

1 month down

25.3%

The trend may continue.

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the indices, based on the most recent trend of closes.

Low percentages suggest the market is overdue to turn (think of it as the likelihood that next week or next month will continue the trend, based on historical performance). Values of 50% mean random, so most percentages will be lower.

The analysis uses data going back 10 years for weekly percentages and 25 years for monthly percentages (or the start of data, whichever is more recent). Any unchanged closing price is interpreted as the end of the string of consecutive up or down closes.

Buy-and-Hold: 12-Month SMA

This indicator warns of an index moving into or out of a bear market. It's based on a 12-month simple moving average of monthly closing prices, so it only changes monthly.
See 12-Month Moving Average for more details.

Dow Industrials: bullish.

Nasdaq Composite: bullish.

S&P 500 Index: bullish.

Dow Transports: bullish.

Dow Utilities: bullish.

Earnings, Chart Patterns & Industries

Earnings season is over.

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

Found

Chart Pattern Name

26

Scallop, ascending and inverted

17

Triangle, symmetrical

11

Head-and-shoulders top

11

Pipe top

9

Channel

8

Diamond top

8

Broadening top

7

Double Top, Adam and Adam

7

Flag

6

Broadening top, right-angled and ascending

Large numbers of bullish or bearish chart patterns can signal short- to intermediate-term market trends (many bullish chart patterns can mean an uptrend will continue, for example).
However, please realize that the short-term price trend could have changed since the pattern was discovered (this is especially true of pipe tops or bottoms, which are weekly patterns).

The 10 types of most frequently appearing chart patterns in the stocks, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

Friday 12/19/14. Pattern Trading Setups for the Weekend.

The following patterns were found manually, so the results may differ from those found using Patternz.

There were 40 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 596 stocks searched, or 6.7%. Based on the percentage, the stock market is
trending since few consolidation patterns appear.

I found 1 pipe bottom chart patterns, which is neutral. High numbers of pipe bottoms can signal a bullish move (I see many of them just before a bear market ends or during a bear market rally. Often it means the first bottom of a double bottom has formed. Thus, expect a move down to the second bottom).

Excluding ETFs, there were 21 bullish chart patterns this week and 9 bearish ones with any remaining (2) being undecided.
The ratio of bullish to bearish patterns suggests the market is hinting of a coming bullish (up) turn.

In the table below, the red and green colors are based on the historical breakout direction for the associated chart pattern. If a high and tight flag appears, the start and end dates highlight the flagpole only and not the flag.

The following tips may help.

Look for patterns with unusual breakout directions, such as an ascending triangle with a downward breakout. The unusual breakout direction can suggest a strong run.

Busted patterns, where price breaks out in one direction, turns around and then breaks out in the opposite direction can lead to powerful moves.

Throwbacks and pullbacks occur about half the time, so be prepared for a retrace after the breakout.

Look for underlying support and overhead resistance to help gauge how far price will move after the breakout.

Thursday 12/18/14. Intraday Market Direction: Nasdaq

The index climbed by 2.1% or 96.48 points. Since 02/05/1971 the index made 43 similar moves on a percentage basis. After those moves, the next day's...

Average gain was 0.9% on 26 occasions.

Average loss was -1.6% on 17 occasions.

Expect the index to close higher 60.5% of the time.

Weekly, since inception on 6/14/2011:

The prediction of the index closing higher has been right 73/127 or 57.5% of the time.

The prediction of the index closing lower has been right 26/55 or 47.3% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

$ $ $

I show a picture of the Nasdaq composite on the 5-minute scale.

I drew two red channel lines along the tops and bottoms of today's trading.

I expect the index to trend higher. It may not stay within those lines, but I believe the trend is up. The retrace of the last two weeks or so, is over. I've flipped my bearish targets (except for the transports, which
need more time to set a trend) and the chart pattern indicator has turned bullish, too. That could change if the market falters, of course, and a definitive signal isn't solid for up to a week.

Nevertheless, I am hopeful. We could use a Santa rally.

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Nasdaq composite, sorted by value. When several are near each other (small differences),
the area might act as support or resistance.

Wednesday 12/17/14. Chart Pattern Indicator: What's It Say?

This is a picture of the chart pattern indicator on the daily scale. The indicator is the line chart below a chart of the S&P 500 composite.

The indicator is still bearish. The index changed from diverging with the indicator to converging with it. In other words, instead of moving up, the index followed the indicator lower.

This chart does not show an end to the downturn, but my portfolio says otherwise. It suggests today's move was narrow, related more to the Dow stocks than the broad market.

This is another view of the CPI only it shows signal changes.

The red bars say the indicator is still bearish.

I'm thinking that this downturn is ending. Since I'm often 2 to 3 days too soon in my calls, I expect an upturn by week's end.

-- Thomas Bulkowski

Tuesday 12/16/14. Dow Approaching Support

The index dropped by -0.6% or -99.99 points. Since 10/01/1928 the index made 641 similar moves on a percentage basis. After those moves, the next day's...

Average gain was 0.7% on 330 occasions.

Average loss was -0.7% on 311 occasions.

Expect the index to close higher 51.5% of the time.

Weekly, since inception on 6/14/2011:

The prediction of the index closing higher has been right 86/136 or 63.2% of the time.

The prediction of the index closing lower has been right 22/41 or 53.7% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

$ $ $

I show a picture of the Dow industrials on the 5-minute scale.

As I was looking at the figure, I noticed some interesting quirks.

First, the blue lines show the Dow finding support every 200 points. The next support using this method is 17,000.

Second, the two red lines show a support area the Dow found in the closing minutes of Monday's session. Could this mean the index has finally found support strong enough to offer hope of a rebound?

No. I don't trust intraday support or resistance on the 5 minute scale. All of those blue lines were penetrated, after all.

Not shown, but on the daily chart, the Dow is approach underlying support. I expect the index to see support at or near 17,000. My targets (middle, top of page, "Tom's Targets") suggest a drop to 16,900 before a rebound occurs.

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Dow industrials, sorted by value. When several are near each other (small differences),
the area might act as support or resistance.

Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.

Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

Pivot point: P = (H + L + C)/3

First resistance level: R1 = (2 * P) - L

First support level: S1 = (2 * P) - H)

Second resistance level: R2 = P + (R1 - S1)

Second support level: S2 = P - (R1 - S1)

H = high price , L=low price, C=closing price

Consecutive Price Trends

Index

ConsecutiveCloses So Far

%

Comments

Dow industrials (^DJI)

1 week down

29.7%

The trend may continue.

1 month down

19.2%

Expect a reversal soon.

S & P 500 (^GSPC)

1 week down

27.6%

The trend may continue.

1 month down

20.2%

Expect a reversal soon.

Nasdaq composite (^IXIC)

2 weeks down

18.7%

Expect a reversal soon.

1 month down

25.3%

The trend may continue.

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the indices, based on the most recent trend of closes.

Low percentages suggest the market is overdue to turn (think of it as the likelihood that next week or next month will continue the trend, based on historical performance). Values of 50% mean random, so most percentages will be lower.

The analysis uses data going back 10 years for weekly percentages and 25 years for monthly percentages (or the start of data, whichever is more recent). Any unchanged closing price is interpreted as the end of the string of consecutive up or down closes.

Buy-and-Hold: 12-Month SMA

This indicator warns of an index moving into or out of a bear market. It's based on a 12-month simple moving average of monthly closing prices, so it only changes monthly.
See 12-Month Moving Average for more details.

Dow Industrials: bullish.

Nasdaq Composite: bullish.

S&P 500 Index: bullish.

Dow Transports: bullish.

Dow Utilities: bullish.

Earnings, Chart Patterns & Industries

Earnings season is over.

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

Found

Chart Pattern Name

21

Triangle, symmetrical

16

Scallop, ascending and inverted

14

Flag

10

Head-and-shoulders top

9

Pipe top

9

Diamond top

8

Channel

6

Triple top

6

Double Top, Adam and Adam

5

Pipe bottom

Large numbers of bullish or bearish chart patterns can signal short- to intermediate-term market trends (many bullish chart patterns can mean an uptrend will continue, for example).
However, please realize that the short-term price trend could have changed since the pattern was discovered (this is especially true of pipe tops or bottoms, which are weekly patterns).

The 10 types of most frequently appearing chart patterns in the stocks, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

Friday 12/12/14. Pattern Trading Setups for the Weekend.

The following patterns were found manually, so the results may differ from those found using Patternz.

There were 31 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 597 stocks searched, or 5.2%. Based on the percentage, the stock market is
trending since few consolidation patterns appear.

Excluding ETFs, there were 7 bullish chart patterns this week and 12 bearish ones with any remaining (7) being undecided.
The ratio of bullish to bearish patterns suggests the market is hinting of a coming bearish (down) turn.

In the table below, the red and green colors are based on the historical breakout direction for the associated chart pattern. If a high and tight flag appears, the start and end dates highlight the flagpole only and not the flag.

The following tips may help.

Look for patterns with unusual breakout directions, such as an ascending triangle with a downward breakout. The unusual breakout direction can suggest a strong run.

Busted patterns, where price breaks out in one direction, turns around and then breaks out in the opposite direction can lead to powerful moves.

Throwbacks and pullbacks occur about half the time, so be prepared for a retrace after the breakout.

Look for underlying support and overhead resistance to help gauge how far price will move after the breakout.

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Thursday.

Chart pattern: Channel from 11/06/2014 to 12/10/2014

Thursday 12/11/14. Big Down Day. What Now?

The index dropped by -1.7% or -82.44 points. Since 02/05/1971 the index made 74 similar moves on a percentage basis. After those moves, the next day's...

Average gain was 1.3% on 33 occasions.

Average loss was -1.3% on 41 occasions.

Expect the index to close lower 55.4% of the time.

Weekly, since inception on 6/14/2011:

The prediction of the index closing higher has been right 73/127 or 57.5% of the time.

The prediction of the index closing lower has been right 26/54 or 48.1% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

$ $ $

I show a picture of the S&P 500 index on the daily chart. This is a change from my normal post due to the big down day we had today (Wednesday). I thought you would be interested in a wider perspective.

The above probabilities say that the index (Nasdaq) is going to close lower tomorrow since that is what has happened in the past. Let's assume it's correct or even if we get a rebound tomorrow, how far
might the index (S&P) drop in the coming days?

I show two red lines on the chart. They are loosely aligned with the peaks and valleys or prior price action. It is my belief that the index will drop to A and stop within those two bands. This is just a guess,
of course, because no one really knows.

I don't view this as the start of a bear market. The economy is doing too well for that to happen.

Still, this is the retrace I've been waiting for. I don't really believe the excuse that lower energy prices have pushed the market down. I just think it was time for a retrace.

The market might surprise us and rebound tomorrow. I just get a sense that there is underlying strength. The big boys wanted to shake out the raw meat and now it's time for a renewed push up. But that remains
to be seen. As they say, buy the dips.

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Nasdaq composite, sorted by value. When several are near each other (small differences),
the area might act as support or resistance.

Wednesday 12/10/14. Chart Pattern Indicator: The Neutral Zone

This is a picture of the chart pattern indicator on the daily scale. The indicator is the line chart below a chart of the S&P 500 composite.

The chart shows the indicator sloping downward even as the index climbed, a classic sign of divergence.

The drop in the indicator suggests that we are going down, but when? The May to July period provides a template for what I expect. The strength in the other indices today may power the markets higher for a time, but
the day will come when the markets will retrace like they did in July. For now, though, there is no telling when that might be.

This is another view of the CPI only it shows signal changes.

Notice that the indicator is solidly in neutral territory. While we could have more bullish green stripes, the white banding suggests a coming drop in the index.

The index dropped by -0.6% or -106.31 points. Since 10/01/1928 the index made 640 similar moves on a percentage basis. After those moves, the next day's...

Average gain was 0.7% on 330 occasions.

Average loss was -0.7% on 310 occasions.

Expect the index to close higher 51.6% of the time.

Weekly, since inception on 6/14/2011:

The prediction of the index closing higher has been right 86/135 or 63.7% of the time.

The prediction of the index closing lower has been right 22/41 or 53.7% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

$ $ $

I show a picture of the Dow industrials on the 5-minute scale.

The index has made an ascending broadening wedge outlined here in red. The index punched through the bottom trendline, staging a downward breakout. Is this typical?

Yes. Statistics for the pattern show that they breakout downward 73% of the time.

The index has pulled back to the bottom of the pattern. Stats for pullbacks says price
continues its upward run 53% of the time. With energy prices powering the economy, maybe this breakout is fake.

An interesting development is that the chart pattern indicator has also turned bearish today. That
could change tomorrow, but could this be the retrace I've been waiting for? Maybe so. On the longer-term chart (not shown), you can see the index rolling over and moving at a more shallow angle than it did
during the October rise. The angle now is more sustainable, but the index still needs to take a rest.

The above probabilities suggest a higher close on Tuesday.

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Dow industrials, sorted by value. When several are near each other (small differences),
the area might act as support or resistance.

Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.

Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

Pivot point: P = (H + L + C)/3

First resistance level: R1 = (2 * P) - L

First support level: S1 = (2 * P) - H)

Second resistance level: R2 = P + (R1 - S1)

Second support level: S2 = P - (R1 - S1)

H = high price , L=low price, C=closing price

Consecutive Price Trends

Index

ConsecutiveCloses So Far

%

Comments

Dow industrials (^DJI)

7 weeks up

4.2%

Expect a reversal soon.

3 months up

28.5%

The trend may continue.

S & P 500 (^GSPC)

7 weeks up

1.4%

Expect a reversal soon.

3 months up

36.2%

The trend may continue.

Nasdaq composite (^IXIC)

1 week down

30.3%

The trend may continue.

1 month down

25.3%

The trend may continue.

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the indices, based on the most recent trend of closes.

Low percentages suggest the market is overdue to turn (think of it as the likelihood that next week or next month will continue the trend, based on historical performance). Values of 50% mean random, so most percentages will be lower.

The analysis uses data going back 10 years for weekly percentages and 25 years for monthly percentages (or the start of data, whichever is more recent). Any unchanged closing price is interpreted as the end of the string of consecutive up or down closes.

Buy-and-Hold: 12-Month SMA

This indicator warns of an index moving into or out of a bear market. It's based on a 12-month simple moving average of monthly closing prices, so it only changes monthly.
See 12-Month Moving Average for more details.

Dow Industrials: bullish.

Nasdaq Composite: bullish.

S&P 500 Index: bullish.

Dow Transports: bullish.

Dow Utilities: bullish.

Earnings, Chart Patterns & Industries

Earnings season is over.

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

Found

Chart Pattern Name

24

Flag

22

Triangle, symmetrical

16

Scallop, ascending and inverted

9

Pennant

7

Diamond top

5

Triple top

5

Double Top, Adam and Adam

5

Pipe bottom

5

Dead-cat bounce

5

Pipe top

Large numbers of bullish or bearish chart patterns can signal short- to intermediate-term market trends (many bullish chart patterns can mean an uptrend will continue, for example).
However, please realize that the short-term price trend could have changed since the pattern was discovered (this is especially true of pipe tops or bottoms, which are weekly patterns).

The 10 types of most frequently appearing chart patterns in the stocks, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

Friday 12/5/14. Pattern Trading Setups for the Weekend.

The following patterns were found manually, so the results may differ from those found using Patternz.

There were 29 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 600 stocks searched, or 4.8%. Based on the percentage, the stock market is
trending since few consolidation patterns appear.

Excluding ETFs, there were 11 bullish chart patterns this week and 11 bearish ones with any remaining (6) being undecided.
The ratio of bullish to bearish patterns suggests the market is hinting of a coming bearish (down) turn.

In the table below, the red and green colors are based on the historical breakout direction for the associated chart pattern. If a high and tight flag appears, the start and end dates highlight the flagpole only and not the flag.

The following tips may help.

Look for patterns with unusual breakout directions, such as an ascending triangle with a downward breakout. The unusual breakout direction can suggest a strong run.

Busted patterns, where price breaks out in one direction, turns around and then breaks out in the opposite direction can lead to powerful moves.

Throwbacks and pullbacks occur about half the time, so be prepared for a retrace after the breakout.

Look for underlying support and overhead resistance to help gauge how far price will move after the breakout.

Thursday 12/4/14. Nasdaq: Steady as She Goes!

The index climbed by 0.4% or 18.66 points. Since 02/05/1971 the index made 539 similar moves on a percentage basis. After those moves, the next day's...

Average gain was 0.8% on 343 occasions.

Average loss was -0.7% on 196 occasions.

Expect the index to close higher 63.6% of the time.

Weekly, since inception on 6/14/2011:

The prediction of the index closing higher has been right 73/126 or 57.9% of the time.

The prediction of the index closing lower has been right 26/54 or 48.1% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

$ $ $

I show a picture of the Nasdaq composite on the 5-minute scale.

I drew two nearly parallel red lines bounding price action. I expect this type of up trend to continue but world events may cause the channel to jump up or down.

You can see one channel (chart left until this past Friday) bump down on Friday and Monday before a new channel formed. Maybe that will happen again. As for now, my crystal ball agrees with the above probabilities that Thursday will close higher.

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Nasdaq composite, sorted by value. When several are near each other (small differences),
the area might act as support or resistance.

Wednesday 12/3/14. Chart Pattern Indicator: What's It Say?

This is a picture of the chart pattern indicator on the daily scale. The indicator is the line chart below a chart of the S&P 500 composite.

Although it is difficult to see on this chart, today's move up was less helpful to portfolios than was the pain inflicted by yesterday's plunge. The indicator dipped into bearish territory but has now
recovered into the neutral zone.

This is another view of the CPI only it shows signal changes.

You can see the signal change from bullish (green) to neutral (white) to bearish (red).

If the index continues to climb then the red bar will disappear. That can happen for up to a week, so be patient. Of course, a turn down will strengthen the bearish signal. Often after three trading days,
the signal is often unlikely to change. However, any unusual move in the index (a large rise or decline) can sway the indicator.

Right now, though, the indicator is bearish on the market.

-- Thomas Bulkowski

Tuesday 12/2/14. Intraday Market Direction: Dow

The index dropped by -0.3% or -51.44 points. Since 10/01/1928 the index made 983 similar moves on a percentage basis. After those moves, the next day's...

Average gain was 0.6% on 467 occasions.

Average loss was -0.7% on 516 occasions.

Expect the index to close lower 52.5% of the time.

Weekly, since inception on 6/14/2011:

The prediction of the index closing higher has been right 86/135 or 63.7% of the time.

The prediction of the index closing lower has been right 22/40 or 55.0% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

$ $ $

I show a picture of the Dow industrials on the 5-minute scale.

I have highlighted a rectangle top using two red lines. I could have drawn them closer together during the Monday to Wednesday period, but chose this configuration. At A, the
index pierced the lower trendline. Then the index pulled back and now rests slightly below the line.

What does this mean? I can only speculate, but I believe it shows weakness. In fact, if you look at the chart pattern indicator (CPI) at the top of this page, it has flipped
to bearish as of Monday's close. It might flip back to neutral or even bullish after the close on Tuesday, but for right now, it's bearish.

All of this spells weakness for the indices.

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Dow industrials, sorted by value. When several are near each other (small differences),
the area might act as support or resistance.

My Prediction

I highlighted two areas of support. The first area peaks in September at A.

The second is the small knot of congestion at B. Both A and B I expect will help support the composite should it begin to retrace the move up from the low in October.

I have been expecting such a retrace but the market has shown strength. Now, I expect the uphill run to continue. In other indices, I think the move over the next two weeks will be a strong one.

Sometimes, you find a congestion region (an area where the index or stock pauses) midway through the uphill or downhill run. That is what creates a measured move up chart pattern.
The B area might be such a pause, although it is too short to be proportional to the long move up. Even so, if it is the mid point, then we have a ways to go before the run ends. (I don't think it's a mid point.
Rather, I think this leg of the move will be shorter.)

Whether any of this plays out is a guess, so we will have to see. The bottom line is I'm looking for a continuation of the upward move this week.

A Brief Look Back

The following is a brief review of how the markets performed over time. The numbers refer to the close-to-close move in the Dow industrials.

Monday:Up 7.84 points.

Tuesday:Down 2.96 points.

Wednesday:Up 12.81 points.

Friday:Up 0.49 points.

Saturday: Holiday or other weird event!

For the Week...

The Dow industrials were up 18.18 points or 0.1%.

The Nasdaq composite was up 78.66 points or 1.7%.

The S&P 500 index was up 4.06 points or 0.2%.

Year to Date...

Dow Industrials

0.4% down from the high of 17,894.83 on 11/21/2014.

16.2% up from the low of 15,340.69 on 02/05/2014.

Nasdaq

0.4% down from the high of 4,810.86 on 11/28/2014.

21.4% up from the low of 3,946.03 on 04/15/2014.

S&P 500

0.4% down from the high of 2,075.76 on 11/28/2014.

19.0% up from the low of 1,737.92 on 02/05/2014.

Economic Reports

The following information is derived from yahoo!finance and sometimes Bloomberg.com with times local to the east coast.

Report

Time

A-FRating

Description

Construction spending

10:00 T

D

Covers residential/non-residential/public spending on new construction.

Auto & truck sales

2:00 T

C-

Monthly sales of domestically produced vehicles.

Productivity & costs

8:30 W

D+

Cost of producing a unit of output.

Crude inventories

10:30 W

?

My guess: Measures oil inventory.

FEDs Beige book

2:00 W

?

Reports on economic conditions.

Initial jobless claims

8:30 Th

C+

Counts people filing for state unemployment benefits.

4 Employment reports

8:30 F

A

Nonfarm payrolls, unemployment rate, avg workweek, hourly earnings.

Trade balance

8:30 F

C+

Signals balance of exports & imports.

Factory orders

10:00 F

D+

Durable/non-durable goods orders w/factory inventories.

Consumer credit

3:00 F

D-

Measures auto, credit card and other debt.

Options Expiration

No options expire this week.

Swing and Position Traders: Chart Pattern Indicator

As of 11/28/2014, the CPI had:

28 bearish patterns,

57 bullish patterns,

290 patterns waiting for breakout.

The CPI signal is 67.1%, which is
bullish (>= 65%).

The chart pattern indicator is bullish
with 1 of 3 full triangles showing (). Additional triangles are a measure
of strength with solid triangles meaning a more reliable signal than half triangles.

Swing Traders: Pivot Points

The following is based on an SFO article in December 2004 by John Seekinger, titled, "Take a
two-dimensional approach." He offers these tips.

Index

S2

S1

Pivot

R1

R2

Dow Industrials (^DJI): Daily

17,758

17,793

17,843

17,879

17,929

Weekly

17,735

17,782

17,838

17,884

17,940

Monthly

16,212

17,020

17,458

18,265

18,703

S&P500 (^GSPC): Daily

2,059

2,063

2,069

2,074

2,080

Weekly

2,058

2,063

2,069

2,074

2,080

Monthly

1,900

1,984

2,030

2,113

2,159

Nasdaq (^IXIC): Daily

4,772

4,782

4,796

4,806

4,821

Weekly

4,688

4,740

4,775

4,827

4,863

Monthly

4,318

4,555

4,683

4,920

5,048

Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.

S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.

If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.

In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.

A move outside of daily R1 or S1 usually does not mean a breakout.

The odds suggest that the entire week's price action will remain between weekly R2 and S2.

Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.

Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

Pivot point: P = (H + L + C)/3

First resistance level: R1 = (2 * P) - L

First support level: S1 = (2 * P) - H)

Second resistance level: R2 = P + (R1 - S1)

Second support level: S2 = P - (R1 - S1)

H = high price , L=low price, C=closing price

Consecutive Price Trends

Index

ConsecutiveCloses So Far

%

Comments

Dow industrials (^DJI)

6 weeks up

5.4%

Expect a reversal soon.

2 months up

40.2%

Expect a random direction.

S & P 500 (^GSPC)

6 weeks up

5.1%

Expect a reversal soon.

2 months up

42.1%

Expect a random direction.

Nasdaq composite (^IXIC)

6 weeks up

5.4%

Expect a reversal soon.

2 months up

40.5%

Expect a random direction.

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the indices, based on the most recent trend of closes.

Low percentages suggest the market is overdue to turn (think of it as the likelihood that next week or next month will continue the trend, based on historical performance). Values of 50% mean random, so most percentages will be lower.

The analysis uses data going back 10 years for weekly percentages and 25 years for monthly percentages (or the start of data, whichever is more recent). Any unchanged closing price is interpreted as the end of the string of consecutive up or down closes.

Buy-and-Hold: 12-Month SMA

This indicator warns of an index moving into or out of a bear market. It's based on a 12-month simple moving average of monthly closing prices, so it only changes monthly.
See 12-Month Moving Average for more details.

Dow Industrials: bullish.

Nasdaq Composite: bullish.

S&P 500 Index: bullish.

Dow Transports: bullish.

Dow Utilities: bullish.

Earnings, Chart Patterns & Industries

Earnings season is either underway or should be starting soon. The sessions could be more volatile.

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

Found

Chart Pattern Name

27

Flag

15

Triangle, symmetrical

14

Scallop, ascending and inverted

12

Pennant

7

Diamond top

5

Pipe bottom

5

Broadening top

3

Head-and-shoulders bottom

3

Dead-cat bounce

3

Double Top, Adam and Adam

Large numbers of bullish or bearish chart patterns can signal short- to intermediate-term market trends (many bullish chart patterns can mean an uptrend will continue, for example).
However, please realize that the short-term price trend could have changed since the pattern was discovered (this is especially true of pipe tops or bottoms, which are weekly patterns).

The 10 types of most frequently appearing chart patterns in the stocks, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.